Los Angeles County and Los Angeles Unified School District are
Hundreds of lawsuits have been filed across the state against cities, counties and school districts since Assembly bills
The twin laws extended the window for adult survivors of sexual abuse to file claims. AB 218, which took effect in January 2022, allowed for adult survivors of childhood sexual abuse to file claims through the end of 2022. AB2777 allowed for claims to be filed between Jan. 1, 2023, and Dec. 31, 2026.
Los Angeles County officials are working with advisors to come up with a plan involving 26-year bonds to pay for its
LAUSD sold $308 million of taxable
Smaller school districts may find it harder to fund the judgments.
The California School Boards Association has been lobbying lawmakers to ease the financial burden for school districts across the state.
Those efforts include
The CSBA has taken the stance of don't pass without amendments, but Flint was quick to credit the bill's author, Sen. John Laird, D-Santa Cruz, for bringing everyone together and working hard to find a solution. SB577 probably won't be heard until after state lawmakers, whose long summer break started Friday, return Aug. 18, Flint said.
One solution discussed was to create a state fund for smaller school districts to tap, but given the state's own current financial troubles that one is unlikely to gain traction, Flint said.
"We want to make amends whenever there is a case of sexual abuse for someone who was in the care of one of our schools, but we have to balance the desire for compensation or remuneration against the needs of today's students," Flint said. "The balance currently seems out of whack, as the law as it is currently written has the potential to bankrupt schools, and short of that, reduce available resources for today's students, in order to pay claims that are 40 years old — or in one case 80 years after the fact."
Flint added the CSBA doesn't want a solution that just enables the school districts to assume more debt and stretch it out over years. It wants a solution that provides a financial backstop so payments don't come out of a school district's general fund and to constrain the number of cases the school districts are dealing with.
"Without substantial changes that reduce the size of the claim awards, you are still putting school districts in a situation where they take on debt that could reduce their bonding capacity," Flint said.
LAUSD officials wouldn't comment on whether they might need to issue more than the $308 million priced July 3.
"Investor demand was solid and the amount of any future issuances is to be determined," said Pedro Salcido, the district's deputy superintendent for business services and operations, who responded through a spokeswoman.
LAUSD priced the debt at par July 3 to yield between 4.213% for the 2027 maturity to 5.455% for the 2040. The bonds received an AA-minus rating from Fitch and Aa3 rating from Moody's. Both assigned stable outlooks.
The district's high reserves maintained at 20% since 2017, and over 43% in fiscal 2024, were cited by Fitch for the AA-minus rating. Though Fitch also noted the school district is "projecting significant structural deficits and declines in fund balances in the coming years as expenditures outpace revenues amid declining enrollment, the loss of one-time COVID-19 funds and a more constrained state funding framework."
The school district's chief financial officer, Chris Mount-Benites,
To help pay for the claims and avoid layoffs, the LAUSD Board of Education approved a reduction of payments into its retiree healthcare benefits fund over the next three years when it approved an $18.8 billion budget in June.
The approved budget reduced $645 million in planned contributions to the district's retiree health benefits account to cover possible wage increases, and provide some breathing room for the school district.
"The biggest threat to us is the unknown associated with state, and particularly, federal economic conditions," Superintendent Alberto Carvalho said during the June 24 board meeting. A "simple shift in Title One" funding calculations could potentially deprive the district of $300 million in federal funding during the 2026 fiscal year, he said.
The Trump administration has
The potential funding loss primarily impacts programs serving low-income and immigrant student communities, including family support programs, Carvalho said.
He recommended lowering payments to retiree healthcare benefits over the next three years to "address the needs of our workforce and whatever areas of uncertainty may lie ahead," saying the healthcare trust is performing well.
The budget lowers contributions to the fund over a three-year period, Carvalho said, but he advised against doing anything more aggressive, because it could "imperil our ability to sell judgment obligation bonds, which we would then be forced to pay as cash settlements, the legal settlements, many of which could go back decades."
Los Angeles County enacted its own cuts in order to set aside money to ride out uncertainty and to help pay its $4 billion settlement.
The county's ratings were affirmed at AAA by Fitch Ratings and S&P Global Ratings and Aa1 from Moody's Ratings in June ahead of a $700 million tax and revenue anticipation notes pricing July 1.
The rating agencies cited the county's disciplined planning, strong operating performance and robust levels of reserve funds as factors in affirming the ratings, which came right after the county announced it had reached a
Los Angeles County "has planned carefully for this settlement to minimize the impacts on our nearly 10 million residents," said Fesia Davenport, the county's chief executive officer. "The scale of the settlement required a multi-faceted strategy relying on a combination of cash, reserves and borrowing."
In April, Davenport said, "we enacted 3% cuts for most county departments and tapped into our rainy day fund for the first time since the Great Recession. And we are preparing to issue judgment obligation bonds to pay for a significant part of the $4 billion."
The county is still working with its banking advisors on the terms and timing of a bond offering, so Davenport said she could not share "more specifics on the size or timing of the offering at this time, other than to confirm that we anticipate the county will need to pay hundreds of millions in debt service and continue paying off the bonds until 2051."
The county hasn't selected a finance team yet for the potential bond issue, according to a spokeswoman.
She emphasized that the 3% cuts were "just to pay for the AB 218 settlements," saying the county has since enacted steeper 5.5% cuts to fund anticipated labor increases.
"And of course, we are facing some potentially devastating cuts in federal funding that we have been working to accurately estimate and plan for," Davenport said. "Los Angeles County is facing an unprecedented series of financial challenges, and this settlement will impact our budget for years."
Marilyn Cohen, chief executive officer of Los Angeles-based Envision Capital Management, said she won't invest in judgment obligation bonds of any type, because they are a bad idea for investors.
"There is only a promise behind it, no ad valorem property tax, no water revenues, just a promise," Cohen said. "And, bondholders are not paid for this risk, and they are low on the totem pole."
She adds she wouldn't invest in LAUSD because it is run so poorly. "It's very sad for me as a taxpaying resident and California muni investor myself," Cohen said.
